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Alliance Data (ADS) Poised for Growth on Segmental Strength

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Alliance Data Systems Corporation (ADS - Free Report) remains well-poised for growth on the strength of solid performances across all three segments. Organic growth has been driving the top line that has witnessed a five-year CAGR of 18%. Strategic acquisitions expanding international exposure with solid growth opportunities have also aided revenue rise.

The company is expected to continue benefiting from current trends in consumer-based business, thus shifting their marketing spends to data-driven marketing strategies.

Alliance Data has delivered positive surprises in three of the last four quarters with an average beat of 2.70%.

Banking on the strength of segmental performance, Alliance Data estimates to deliver earnings per share of $18.10 on revenues of $7.8 billion in 2017 while 2018 earnings per share are projected at a higher value of $21.50 on greater revenues of $8.7 billion.

Management expects revenues and earnings per share growth of 10% at BrandLoyalty. Bottom line at Epsilon is projected to grow 4% in 2017 riding on growth in auto, CRM and data.

Alliance Data’s solid capital position helps it enhance shareholders’ value via dividends and share buybacks. The company has been authorized to buy back shares worth $1 billion through July 2018. It also initiated a quarterly dividend in fourth-quarter 2016, reflecting a major change in the shareholders’ return policy.

However, escalating expenses remain a concern for Alliance Data, weighing on margin expansion. We expect this metric to increase going forward as the company continues to pursue strategic initiatives.

Stocks That Warrant a Look

Financial transaction service providers that deserve a glance are Visa, Inc. (V - Free Report) , Total System Services, Inc. (TSS - Free Report) and Green Dot Corporation (GDOT - Free Report) .

Visa offers a range of branded card payment product platforms, used by customers to develop and offer credit, charge, deferred debit, debit and prepaid payments as well as access cash. The company witnessed positive estimate revisions over the last few weeks.  

Total System Services provides electronic payment processing, merchant services and related services to financial and non-financial institutions in the United States and internationally. The company witnessed positive estimate revisions over the last few weeks.  

Green Dot Corporation operates as a pro-consumer technology bank holding company, providing personal banking for the masses. The company witnessed positive estimate revisions over the last few weeks.  

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